OVL closes in on Imperial deal; shareholders nod soon

London | Updated: Dec 31 2008, 05:19am hrs
ONGC Videsh, the overseas arm of the state-owned Oil and Natural Gas Corp, is close to securing the minimum threshold of shareholder acceptances for acquiring the UK-listed Imperial Energy, a report on Monday said.

OVL can walkout of the estimated $1.9 billion deal to acquire Imperial, which has oilfields in Russia, if less than 90% of Imperial shareholders accept its offer of 12.50 pounds a share by tomorrow afternoon (GMT). Imperial has received a flurry of acceptances from shareholders in the past few days, in spite of the Christmas holiday, and expects to receive more today, the final full day of business available, the Financial Times reported on its website on Monday.

OVL is closing on the 90 per cent level of acceptances, FT said without saying where it got the information from.

In India, OVL remained tight-lipped on the transaction, offering no comments on the number of shares tendered so far. There have been murmurs of ONGC looking at options to revise or withdraw the offer as returns have plummeted with the slide on crude oil prices. The offer was made at a time when the international price of crude was hovering around $128 a barrel. Crude has since then shaved-off two-third of those levels, resulting in a drastic fall in returns to 3-4 per cent from 12.6% estimated keeping crude oil price at USD 100 per barrel.

ONGC officers union has also opposed the deal saying Imperial had consistently failed to live-up the targeted crude oil production.

Association of Scientific and Technical Officers said Imperials crude production was uch lower than its claimed output of 12,000 barrels per day and is in no position to meet the targeted output of 25,000 bpd by 2008-end. Quality of deal is also questionable as the local Russian company like Rosneft has refused to be partner in the deal at this (acquisition) cost), ASTO said in a letter to ONGC Chairman and Managing Director R S Sharma. The deal is the first attempt by ONGC to buy a London-listed company.

When the Indian cabinet approved the proposal in Au gust 2008, Imperial was producing oil around 7,000 bpd, targeting to increase the production to 25,000 bpd by end of 2008 and 80,000 bpd by end of 2011. The production is likely to go up to 130,000 bpd by end of 2015. Imperial had 920 million barrels of oil equivalent of 2P (proved plus probable) hydrocarbon reserves. D&M, an independent US reservoir firm had put the 3P (proved plus probable plus possible) reserves around 3.4 billion boe. 1P (proved) reserves have at least 90% probability while 2P and 3P reserves have at least 50 per cent and 10% probability respectively.